New-home sales surged in August to the highest level in more than six years, a sign that the housing recovery is making progress.
Purchases of new houses jumped 18% to a 504,000 annualized pace, the strongest since May 2008 and surpassing the highest forecast in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. The one-month increase was the biggest since January 1992.
The housing market is improving in fits and starts this year amid slow wage growth and tight credit conditions. Sustained improvement in the job market will be needed to push up pay and sustain a stronger recovery.
“Sales could come in a little faster in the second half of the year,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York, who projected an increase to 450,000, among the highest in the Bloomberg survey. “The housing market is stable.”
The median forecast of 74 economists surveyed by Bloomberg called for the pace to accelerate to 430,000. Estimates ranged from 405,000 to 455,000 after a previously reported 412,000 rate in July.
Stocks fluctuated, after a three-day slump for the Standard Poor’s 500 Index, as investors assessed the new-home sales data for clues on the timing of any increase in interest rates. The SP 500 fell 0.1 percentage point to 1,979.95 at 10:16 a.m. in New York.
The sales data are volatile because they’re based on a small sample, which means last month’s figure could be revised over coming months. There is a 90% chance the number of purchases last month will be within a range of 421,850 to 586,150, according to Bloomberg calculations.
The median sales price of a new house climbed 8% from August 2013 to $275,600, today’s Commerce Department report showed.
Purchases climbed in three of four U.S. regions, led by a 50% surge in the West. The supply of homes at the current sales rate dropped to 4.8 months from 5.6 months in July. There were 203,000 new houses on the market at the end of August.
New-home sales, which last year accounted for almost 8% of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.
Existing home sales dropped 1.8% to a 5.05 million annual pace last month after reaching a 10-month high of 5.14 million in July, the National Association of Realtors reported this week.
Housing starts also slumped in August, falling 14.4% to a 956,000 annualized rate following July’s revised 1.12 million pace that was the strongest since November 2007, Commerce Department data showed.
Going forward, an improving job market could help buyers enter the market. The economy has added an average of 215,000 jobs per month so far this year, up from an average of 194,250 for all of last year, based on Labor Department data.
Borrowing costs remain historically low even as Federal Reserve policy makers signal they’ll start to boost their benchmark interest rate nest year. The average rate on a 30-year fixed mortgage was 4.23% in the week ended Sept. 18, down from 4.53% at the start of January, according to data from Freddie Mac.
Federal Way, Wash.-based timberland owner Weyerhaeuser Co. is looking for an improvement in the real estate market, which would benefit its business.
“We see increased housing recovery, not quite as fast as we probably would all like to see it,” Chief Financial Officer Patricia Bedient said in a Sept. 9 presentation. “But nonetheless, we see that to continue to unfold.”